Tech Engineering , Inc. makes a product in two different styles, for the export

Question

Tech Engineering, Inc. makes a product in two different styles, for the export and domestic markets. The annual demand forecasts are 20,000 units and 125,000 units for the export and domestic market respectively. Additional data available are shown below. Direct labor rate is $18/hr including benefits.

DL Hrs/Unit

Direct Material Cost/Unit

5.20

$300

2.00

100

Annual Events Contributing to Cost

The overhead expenses are estimated to be $3.0M.

1) For Tech Engineering, what is the unit production cost using the traditional method for the Domestic product?
2)For Tech Engineering, compute the overhead rate per direct labor hour using the direct labor hour allocation method?

DL Hrs/Unit

Direct Material Cost/Unit

5.20

$300

2.00

100

Explanation / Answer

Total units= 20000+125000= 145000

unit production cost using the traditional method for the Domestic= 3*1000000/145000= $20.69 per unit

2)For Tech Engineering, compute the overhead rate per direct labor hour using the direct labor hour allocation method?

Total labor hours = 5.2*20000 + 2*125000= 354000 labor hours

overhead rate per direct labor hour = 3*1000000/354000= $8.47 per labor hour

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